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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Paul Kern who wrote (80166)	3/22/2007 11:06:30 AM
From: 5thGrader	Respond to of 110194

Laddering of stock as practiced by booyah boy - why do these stocks rocket up day one and then fall back to earth faster than Major Tom's wet dream? Fortress Investment Group LLC, which manages hedge and private- equity funds, listed its shares in February and the stock almost doubled on the first day it was traded. internetnews.com Maier, meanwhile, said he turned over to federal prosecutors transcripts of a taped interview with another trader from Cramer's hedge fund in which they discussed the IPO practice known as "laddering" (details of which were first reported by Forbes magazine last week). In an article Maier has since submitted to numerous media outlets, he describes laddering as "the insertion of forced demand by investment bankers for an IPO stock at progressively higher levels," guaranteeing heavy demand for the stock in the first offering and also inflating prices in aftermarket, or secondary markets. Maier details in his book and in the article, how, as a money manager with Cramer's hedge fund in the late 1990s, he was given preferential treatment on buying into initial offerings because of Cramer's relationship with Goldman (he's a former employee). Maier writes that the broker for Goldman laid out the rules of the game. "To increase my allocation, I should always agree to buy more stock after the IPO opened for trading. The proposal was that Goldman would give me a few thousand extra shares at the initial, low price, if I bought more wherever the stock started trading in what was known as the 'aftermarket,' or the open market when everyone else was able to buy, usually at a significantly higher price." Maier continued: "Honestly, we at Cramer & Company all knew these deals were trading at, to say the least, ridiculously high prices. Still, the deals kept coming, and many of them even continued to go up." A spokesman for Goldman Sachs said "we find Maier's comments self-serving and have to do with promoting a book. We don't believe we've engaged in any wrongdoing and all our activities are appropriate." In an e-mail exchange, Cramer said no one has contacted him from the U.S. Attorney's office. Cramer also wrote: "I am wondering if Nick will call the Union County New Jersey prosecutor next because our water sprinklers went off accidentally last Saturday, violating the tough drought rules." Maier said he has voluntarily spoken to the SEC regarding an investigation into what he calls "Certain Initial Public Offerings." The 33-year-old also said that although he got some details wrong in the book regarding an alleged SEC probe of Cramer (which publisher HarperCollins had to correct before re-issuing), he stands by his account of what he saw when he worked for Cramer's hedge fund company from 1994 to 1998. In the book, Maier writes that "Cramer engaged daily in brilliant but questionable practices, ranging from blatantly unethical strong-arming to spreading false rumors and leaking important information." He also describes how CNBC anchor Maria Bartiromo and anchor David Faber were fed scoops or rumors by Cramer, that he in turn would exploit for his own stock holdings once the anchors broke the news on air. He also writes that the firm acted against what Cramer said about some stocks during television appearances.